4Levers of Cost ReductionWhat, Where, and How

From reading Part I of our book, you should understand the hallmarks of a Fit for Growth organization: a relentless focus on differentiating capabilities, an omnipresent discipline to optimize costs, and an aligned and supportive organization to enable growth. Fitness is an ongoing exercise, comparable to what an athlete does by training methodically and regularly. It is not, in other words, a one-time activity. Unfortunately, like the patient who doesn't change his habits except in response to a doctor's dire warning, most companies do not think about fitness until they have a problem—until their profitability, market share, or stock price suffers. At that point a company must act quickly to get back in shape, and rather than a well-intentioned goal toward which everyone works gradually, cost reduction becomes an urgent sprint to survive.

Part II of our book is dedicated to helping companies understand the tools they have at their disposal—the levers they can pull—to cut costs. To focus on each of these levers and explain them in detail, we will show how they work in a major, programmatic Fit for Growth transformation initiative. To be sure, the same cost-reduction levers can be, and often are, used in less comprehensive circumstances—when healthy companies are trying to improve an already high level of performance, redeploy their resources to carry out new strategies, or maintain and increase their fitness level after a transformation ...

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